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Apple's new iPod line to produce "homerun" of a holiday quarter

post #1 of 23
Thread Starter 
Investment bank Piper Jaffray said Thursday that Apple's recent iPod product line overhaul has placed the company in its best position ever for the holiday shopping season, but warned investors against anticipating much upside from the announcements during the soon-to-end Sept. quarter.

Speaking to clients in a research note, analyst Gene Munster explained that while expectations for Apple's December quarter -- which begins on Sunday -- are extremely high given the company's new media player lineup, history suggests that the impact on the Sept. quarter will be minimal.

"We believe the new iPods will lead to a homerun December iPod quarter, but the Street needs to be realistic about September iPod units given that all of new iPods were only available for two weeks in the quarter," he wrote.

While Munster believes there's a 25 percent chance that the new offerings could fuel a significant rise in Apple's Sept. results, his analysis of the company's historical performance indicates that investors should expect no more than "slight upside at best."

"Our analysis of the last 5 major iPod releases and the iPod unit number in the first quarter of availability points to more conservative numbers," he explained in more detail. "Specifically, the Sept. 7, 2005 and the Sept. 12, 2006 iPod launches (which coincide extremely well with the Sept. 5, 2007 launch), led to an average of 6.1 percent quarterly growth in the Sept. quarter."

Assuming the same growth rate would apply this year, Munster suggests that investors anticipate an iPod unit sales number around 10.42 million units for the Sept. quarter ending Saturday. This compares to what the analyst calls a somewhat overzealous Street consensus estimate of 10.6 million units, and his own published guesstimate of 10.2 million units.



In his note to clients Thursday, the Piper Jaffray analyst also re-emphasized his belief that the new iPod line signals the completion of a focused product line for the Cupertino-based electronics maker. Unlike previous models, which were based on a simpler menu-based operating system, the ones announced earlier this month run on a modified version of the company's Mac OS X operating system.

"But most importantly, all of Apple's consumer electronics products are now based on OS X: Macs, iPods, the iPhone, and Apple TV all run a modified version of the same operating system," he continued. "Instead of diversifying its business too dramatically, as some have argued, we believe Apple has effectively focused its business on OS X, one of the company's core assets."

Munster maintained his Outperform rating on shares of Apple with a 12-month price target of $211 -- currently the financial industry's highest.
post #2 of 23
So is this confirmation that the Classic and new Nano run click-wheel variant of OS X? They have ARM processors and it seems like it would have been a massive job bringing quartz extreme-like window compositing and core animaton-like layered animations to pixo, a dead end operating system.
post #3 of 23
Quote:
Originally Posted by retroneo View Post

So is this confirmation that the Classic and new Nano run click-wheel variant of OS X? They have ARM processors and it seems like it would have been a massive job bringing quartz extreme-like window compositing and core animaton-like layered animations to pixo, a dead end operating system.

That's what Gene said in his note but I'm not sure if that is based on a confirmation or purely an assumption garnered from the looks of the software.

Best,

K
EIC- AppleInsider.com
Questions and comments to : kasper@appleinsider.com
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EIC- AppleInsider.com
Questions and comments to : kasper@appleinsider.com
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post #4 of 23
Whoa. That is incorrect. This guy is jumping the gun.

The nano and classic are *not* running OS X Mobile. This was confirmed by Apple. They're running in all likelihood a refreshed version of the Pixo OS.
post #5 of 23
I always wondered why this analyst gives such high estimates. He must really love Apple. What does he see that most analysts don't. As I've said before, there must be a lot of guessing going on and that's why there is such a spread in target prices.

So this quarter may produce a home run, but I think the investors are looking for a "grand slam." I'll settle for a three run homer to boost Apple up to $180, but nothing short of a "grand slam." will produce $200+. Such silly analogies, so pardon me.
post #6 of 23
Slightly related, but I went to the Apple Store in Regents Street, London (UK!) today and the crowd around the iPod Touch table was HUGE. Literally 100 people around the table (with only like 8 iPods).... The iPod Classics and iPod Nanos were abandoned (well, maybe 1 or two customers). Quite a few people playing with Apple TVs and the Macs were (as usual) popular with the Blogging, emailing, myspacing crowd...

I think the iPod Touch will do very well
post #7 of 23
Quote:
Originally Posted by Constable Odo View Post

I always wondered why this analyst gives such high estimates. He must really love Apple. What does he see that most analysts don't. As I've said before, there must be a lot of guessing going on and that's why there is such a spread in target prices.

Constable, are his estimates too high? I bought into AAPL around $59-75 last year and AAPL stock price has far surpassed Gene's estimates at the time (he did say a 12-month price target of around $120, which seemed unreal at the time yet today's price is $154.08). If we look at his track record, his estimates might even be characterized as understated.
post #8 of 23
Quote:
Originally Posted by eridium View Post

Constable, are his estimates too high? I bought into AAPL around $59-75 last year and AAPL stock price has far surpassed Gene's estimates at the time (he did say a 12-month price target of around $120, which seemed unreal at the time yet today's price is $154.08). If we look at his track record, his estimates might even be characterized as understated.

Are any of the regulars here (if anyone here can be called "regular" ) keeping track of what the analysts project, when they project it, versus what really happened? I'd love to see an Analyst Accuracy chart.

Proud AAPL stock owner.

 

GOA

Reply

Proud AAPL stock owner.

 

GOA

Reply
post #9 of 23
I'm guessing September will already reflect significant gains in iPod sales. A lot of people were holding off on buying iPods until the new models come out. I bought a touch and the new nano for the kids shortly after they came out. When i bought the touch, it was flying out of the shelves. A group of us were actually waiting for the Apple Store to open and we all went straight for the touch. A lot of my kids' friends all got new iPods this September as well. Yeah it's anecdotal. But probably typical.
post #10 of 23
Every analyst I find has price targets ranging from 165 to 211. Gene Munster seems to understand Apple more than any other.
Ever since the announcement of the Iphone last January, all the analysts have raised expectations considerably. And now, eight months later, with the economy tanking , it makes me a little nervous about this quarters earning release.
I have been visiting the Apple store in Tampa every few weeks and they are always busy while the rest of the mall traffic is slower than last year.
post #11 of 23
Quote:
Originally Posted by AppleInsider View Post

"Specifically, the Sept. 7, 2005 and the Sept. 12, 2006 iPod launches (which coincide extremely well with the Sept. 5, 2007 launch), led to an average of 6.1 percent quarterly growth in the Sept. quarter."

As I recall, there were no "game-changing" ipods introduced in 2006: just memory bumps, essentially. Nothing like the Touch, video on the nano. Even the multicolored shuffles were introduced this year (now we will see how effective the "why buy just one?" ads are in pushing the refreshed colors).

And on a side note, isn't it about time for an anouncement of the refreshed Zune line? Any speculation as to what that might be? I'd guess larger HDDs, two NAND flash player sizes (with the WiFi Squirt (TM) capability, natch), new colors. Seems kind of tame in the face of iPods. Holding my breath in anticipation.
post #12 of 23
Quote:
Originally Posted by Wildguess View Post

Gene Munster seems to understand Apple more than any other.

I'll second that. He does seem enamored with statistics, though (what does "there's a 25% chance that..." mean, in any meaningful sense? Why not just "possible, but unlikely"?). Still, I find his analysis usually interesting, whereas some other analysts I find merely amusing.
post #13 of 23
SInce my family's been seriously long on aapl for the past 8 years, we've made a ton of $$$ AND we plan on staying long until some real competitive threat shows up.

Aapl's firing on all 12 cylinders.

With so much riding on this investment, I read all the rumors, news, and reports I can get my hands on.

Having said that, I can assure you that aapl has beaten almost every analyst prediction for many years. The one who is most accurate (and confident) has been Carl Howe. Check his blog out at http://www.blackfriarsinc.com/blog

If you want to read about aapl's wonderful technical and dominant prospects read roughlydrafted.com. Daniel is an excellent, 'hair-on-fire' historian and technobrain.
post #14 of 23
Quote:
Originally Posted by SpamSandwich View Post

Are any of the regulars here (if anyone here can be called "regular" ) keeping track of what the analysts project, when they project it, versus what really happened? I'd love to see an Analyst Accuracy chart.

Mac Rumors supposedly tracks their predictions.
post #15 of 23
Quote:
Originally Posted by David Stevenson View Post

As I recall, there were no "game-changing" ipods introduced in 2006: just memory bumps, essentially. Nothing like the Touch, video on the nano. Even the multicolored shuffles were introduced this year (now we will see how effective the "why buy just one?" ads are in pushing the refreshed colors).

And on a side note, isn't it about time for an anouncement of the refreshed Zune line? Any speculation as to what that might be? I'd guess larger HDDs, two NAND flash player sizes (with the WiFi Squirt (TM) capability, natch), new colors. Seems kind of tame in the face of iPods. Holding my breath in anticipation.

I think Microsoft reps said a few times that they're working on a phone, one time they said this before Apple announced theirs. The only thing they've done lately is drop the Zune price, which now looks like too little, too late.
post #16 of 23
Hi all - now, I am a HUGE Apple fan - I love the company and have made a very hefty return on this stock, but I would be very concerned over anyone who has not sold at least what has been invested, in order to lock in profits.

I've bought and sold this stock 11 times this year.

When the stock hit 144 a few months ago, I sold everything because there was no justification for that number, even with the iPhone and everything else wonderful from Apple. It then tumbled to $119, at which point I bought back the 400 shares I had sold. I sold AGAIN at $150. Why?

The reasoning is very simple - if you do the math given the current price, P/E and earnings of last quarters, it is almost impossible to justify anything north of $140. They would need to make twice the money they made last quarter.

Granted, I love Apple, but I think that anyone not paying attention to the actual numbers is about to get a very rude awakening....I can understand how easy it is to get attached to the great things these guys make....

Now if you're in the stock for the long term, forget everything I said....
post #17 of 23
Quote:
Originally Posted by Hobbes View Post

Whoa. That is incorrect. This guy is jumping the gun.

The nano and classic are *not* running OS X Mobile. This was confirmed by Apple. They're running in all likelihood a refreshed version of the Pixo OS.

I was talking to an iPod Genius at the Apple Store on Monday, he confirmed that the Classic and Nano were using a "completely new OS". My mind was on something else at the time so I didn't have the presence of mind to ask him if it was OS X. Sorry 'bout that.
post #18 of 23
Ah. iSales! Yes they helped this erstwhile computer and software corporation when their rigid tactics didn't allow them to sell their award winning OS across the board; but sooner or later the iFads will be no more and then iApple will be back in i1996 and iClose to iBankruptcy. They're just silly - obsessive and silly. If you buy AAPL be prepared to dump it; if you're conservative then dump it right after the holidays. After all it doesn't take much smarts to profit on the Street.
post #19 of 23
Quote:
Originally Posted by Fairly View Post

Ah. iSales! Yes they helped this erstwhile computer and software corporation when their rigid tactics didn't allow them to sell their award winning OS across the board; but sooner or later the iFads will be no more and then iApple will be back in i1996 and iClose to iBankruptcy. They're just silly - obsessive and silly. If you buy AAPL be prepared to dump it; if you're conservative then dump it right after the holidays. After all it doesn't take much smarts to profit on the Street.

People keep making that prediction? If you haven't noticed, but Apple isn't a company that stands still. They have $15B in the bank and their sales have been increasing every quarter, and you're basically predicting their demise. Amazing. I don't like some of the stuff they do, but they seem to be doing something right.
post #20 of 23
Quote:
Originally Posted by thebigapple View Post

Now if you're in the stock for the long term, forget everything I said....

Most of us have other interesting things to do with our lives, and are in it for the long haul (not just with AAPL).

Good luck, with all the transactions costs and taxes and time spent jumping in and out...... all I can hope is that you don't do that for a living, and have a day job!

post #21 of 23
Quote:
Originally Posted by JeffDM View Post

People keep making that prediction? If you haven't noticed, but Apple isn't a company that stands still. They have $15B in the bank and their sales have been increasing every quarter, and you're basically predicting their demise. Amazing. I don't like some of the stuff they do, but they seem to be doing something right.

Amen.
post #22 of 23
Quote:
Originally Posted by eridium View Post

Constable, are his estimates too high? I bought into AAPL around $59-75 last year and AAPL stock price has far surpassed Gene's estimates at the time (he did say a 12-month price target of around $120, which seemed unreal at the time yet today's price is $154.08). If we look at his track record, his estimates might even be characterized as understated.

I don't know if his estimates for Apple are too high. They're just higher than most. And of course, to me, they do seem unreal. I don't track estimates analysts give for the most part. I usually can't even remember six months ago.

I do notice that Wu Shaw or Shaw Wu usually gives low estimates and Gene gives high estimates. I happen to notice that estimates are constantly revised. So in three months from now, Gene could revise his estimates down. Hopefully, he won't. But I know for certain I've seen high estimates by a particular analyst, the stock never reaches it, and then is revised down by the same analyst. One example of such a mess happened to Motorola.

So, no, I don't really have an accurate take on whether his estimates are close or not for a 12 month period. It's easy for them to just throw around big numbers, but I try not to get too carried away as I don't wan't to be let down too much if it doesn't pan out. Sorry, but I've had a number of stocks that were supposedly sure things. Plenty of buy ratings but in the end bye, bye.

I was reading what bigapple was saying about there's nothing to justify these numbers of $150. See, I don't understand any of this. Other people say Apple is still priced conservatively and worth the current price. Yet RIM is even more overpriced and keeps pulling stronger. Everybody must see different meanings in the numbers and all this does is give me a headache because I don't see anything that makes much sense to me.
post #23 of 23
Quote:
Originally Posted by JeffDM View Post

I think Microsoft reps said a few times that they're working on a phone, one time they said this before Apple announced theirs. The only thing they've done lately is drop the Zune price, which now looks like too little, too late.

With the FCC approval cycle running about six months, I don't think we'll see a Zphone any time soon. I suspect MS planned a three year business model to reach "parity" with Apple's ipod product lline (at least on paper, spec-wise). I also suspect that the big loser in the Amazon music store "experiment" will be Microsoft and their two DRMs. Of course the "experiment" will be declared a success (how could it not be? it's just another wing of Amazon's on-line service. They still have unbox, after all). The proof of "success" will be when (not if) Universal pulls their library from iTunes for Amazon. Look for AAPL to take a big hit then (after it has soared when the December financials are released (30 million ipods, anyone?).
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